2018 (6) TMI 2 - AT - Central Excise

Clandestine manufacture and removal - manufacture of huge quantity - shortage of imported HM Scrap - reliance placed on the statements of Shri S P Gupta and Shri Darshan Singh - examination of statement as per the procedure laid down under Section 9D of the Central Excise Act, 1944 not done - Held that - Considering the fact that statement of Shri S.P. Gupta and Shri Darshan Singh heavily relied by the adjudicating authority and the procedure laid down under Section 9D of the Act is violated, in that circumstance, the impugned order is not sustainable in the eyes of law - the matter is required to be re-examined in terms of Section 9D of the Central Excise Act, 1944 - directed to examine whether the appellant is having the capacity to manufacture such a huge quantity in such a short span of time and from where the electricity was procured to manufacture such a huge quantity and how the stock verification was done.- appeal allowed by way of remand.

Summary

Issues:
Appeal against duty demand and penalties imposed based on clandestine clearances and evasion of excise duty.

Analysis:
The case involved M/s Bassi Steel Limited appealing against an order demanding duty and penalties for underreporting production and clandestine clearances. The investigation revealed discrepancies in the company's accounts, including unaccounted purchases of scrap and sponge iron leading to the manufacture and clearance of M.S. Ingots without duty payment. The duty involved on the clandestinely cleared M.S. Ingots was substantial. Additionally, the company had voluntarily disclosed unaccounted income to the Income Tax Department in a previous year, indicating a pattern of duty evasion. The show cause notice issued included demands for duty recovery, interest, and penalties on the company and its Director for various periods. The Commissioner's order confirmed a significant duty demand, imposed penalties, and appropriated the amount already paid during investigation. The appellant challenged the reliance on certain statements, lack of procedural compliance, and insufficient evidence regarding production capacity and stock verification. The appellant argued that the impugned order was unsustainable due to procedural lapses and lack of concrete evidence supporting the duty demands.

The Tribunal acknowledged the appellant's contentions regarding procedural violations and directed a re-examination of the case in line with Section 9D of the Central Excise Act, emphasizing the need to assess the company's production capacity, electricity consumption, and stock verification methods. The impugned order was set aside, and the matter was remanded back to the adjudicating authority for re-adjudication. The Tribunal's decision highlighted the importance of following procedural requirements and ensuring a thorough examination of relevant factors before imposing duty demands and penalties in cases of alleged duty evasion and clandestine clearances.